Top 26 Largest US Cities Ranked by Median Household Income

For context, US median household income for 2015 (the year reported on above) was $55,775.

Data sources:
Population of cities here.
Median household income for cities in 2015 here.

Related - highest income communities here. (Top 20 listed below, these are much smaller places and thus vary more from US median.)

Red State, Blue State, Old Jobs, New Jobs

Edward Glaeser's Triumph of the City [2011], opens with some statistics that illustrate the remarkable contrast between big city productivity and smaller city or even rural productivity.

About half the US population "crowd together in the 3 percent of the country that is urban." "Workers in metropolitan areas with big cities earn 30 percent more than workers who aren't in metropolitan areas." And the bigger the city, the more this effect is exaggerated. "Americans who live in metropolitan areas with more than a million residents are, on average, more than 50 percent more productive than Americans who live in smaller metropolitan areas. These relationships are the same even when we take into account the education, experience, and industry of workers. They're even the same if we take individual workers' IQs into account." {emphasis added]
"On average, as the share of a country's population that is urban rises by 10 percent, the country's per capita output increases by 30 percent. Per capita incomes are almost four times higher in those countries where a majority of people in cities than in those countries where a majority of people live in rural areas."

GDP is measured by exchange. Big networks make it easier for people to easily exchange goods, services, and ideas. If you live in a rural area, two miles from your nearest neighbor, it is much harder to exchange anything than it is if you live in a densely populated area where a million neighbors are within a mile. Bit city networks are rich and complex; rural networks are sparse.

City of the Future, Lev Rudnev, 1927

There is so much to this but one comes from openness to innovation. Cities are like diversified portfolios. If you own 50 different stocks, you just accept that one (or two or four or ten) will shrink in value as markets shift; your entire portfolio may well do better in disruptive, tumultuous markets because the one (or two or four or ten) stocks that thrive through this change could create wealth that is worth multiples of what you lost in the bad stocks. The investor who owns one or two stocks sees big change as a threat because if one or two of her stocks collapse in value, the whole portfolio does. There is so much going on in a city that its people can more easily adapt to innovation and disruption. You get laid off from one failed startup and you go to work at another. In a rural area, if you get laid off from a company you may literally need to move out of state. And as a people become more open to innovation and disruption, they create more value over time than people who try to conserve what they have and protect themselves from change.

As an economic model, cities just work better than rural areas. To the extent that the country moves in the direction of what works best for rural areas, it will generally move in the wrong direction for economic progress.

The Loneliness of the High-Priced Home Buyer

"No one goes there anymore. It's too crowded."
- Yogi Berra

Around the world, people are talking about a housing bubble. It may be that the rise in housing prices is a function of a fundamental economic trends that are bigger than the housing market.

In some parts of the country, people can talk about weather. In San Diego, there is not much weather to talk about. No snow or tornadoes, hail is rare, rain is infrequent (about 6 inches since last July) and heat waves, while increasingly common, are still the exception to the rule of mild temperatures. So, our small talk trends towards real estate prices.

Median home prices vary by zip code, from $375,000 (for people willing to commute about 2+ hours each day) to $3.3 million, but average more than $500,000. This suggests a mortgage payment of about $3,000 a month, or a gross income of nearly $60,000 a year just for the property taxes and mortgage. Sadly, San Diego is not hugely different than many metropolitan areas around the country.

It's easy to believe that this isn't sustainable and home prices have indeed nudged downwards in the last year. But it may be that we'll look back at this as an affordable time for housing. Or, more accurately, a time when stand alone homes on lots could be had for cheap.

Every decade, a higher percentage of folks live in the city and that's a trend projected to continue for a few more decades. As demand increases, prices for real estate will rise. It is quite likely that even suburban neighborhoods will see more high-rises. I'd argue that there are at least three reasons for this - all related to specialization.

Specialization in work means that a person is more likely to live in or near an urban center. A person whose expertise is creating the glass stunt men can leap through in movies is unlikely to base his business in Grimes, Iowa. The same is true for specialists who do things like arrange clinical trials for drug testing or write ad copy or calculate amortization tables. As the work force becomes more specialized, and the number of specialists with whom one needs to collaborate is more extensive, the draw to work in the city is stronger.

Specialization in consumption also draws people into cities. It is difficult to find sushi in Ronan, Montana or calypso band concerts in Bellingham, Washington. Large towns and small cities have a great allure, but offer little variety. Food, concerts, museums, and stores struggle to market even main stream products in a sparsely populated region. As people become more discerning consumers, more demanding of options to support vegan or gluten-free diets, or love of French film or metal-rock, they find themselves drawn to metropolitan centers.

Finally, one principle that guides the design of public places is that people are drawn to people. It is not just that people come together at the fair or into downtown in order to find food or entertainment. We are drawn into groups because we find people fascinating. As much as we hate congestion, lines, and high prices, people like to be around people.

And this last impulse, too, may be a product of specialization. As our production and consumption habits seem to separate us more from others, it may be that we feel a stronger pull towards them, a visceral need to connect with those from whom we would otherwise feel disconnected. Physical separation coupled with the isolation of mind and culture may simply be too much for the soul. It may be that we're drawn to live amongst more people as an antidote to the isolation that would otherwise overtake us as specialists.

Forecasting a fall in home prices
Ivine Housing Blog

Forecasting steady or rising prices
The Daily Reckoning